Small businesses can claim an additional 30% tax deduction for eligible assets costing $1,000 or more that they acquire from 13 December 2008 to 30 June 2009, and install by 30 June 2010.

For eligible assets costing $1,000 or more that they acquire from 1 July 2009 to 31 December 2009, they can claim a 10% deduction where they are installed by 31 December 2010.

This deduction is on top of the usual capital allowance deduction (i.e., depreciation) claimable for the asset in the taxpayer's income tax return.

To benefit from this tax break a small business must have a turnover of $2 million a year or less.

Other businesses

Other businesses can receive the same deductions for eligible assets greater than $10,000.

Which assets are eligible?

Assets eligible for the allowance are most new tangible depreciating assets and new expenditure on existing assets used in carrying on a business.

Land and trading stock are excluded from the definition of depreciating assets, and will not qualify for the deduction.

Example

A small business that buys and installs a $2,000 computer before the end of June 2009 can claim an additional $600 deduction (i.e., 30%) in its 2008/09 tax return.

Frequently asked Questions

Can I claim the investment allowance on cars and other motor vehicles?

Yes, cars are eligible, except for cars that are using the cents per kilometre method of claiming tax deductions for the car. This is different to previous investment allowances which excluded motor vehicles.

Does it apply to luxury cars?

Yes, except the cost on which the investment allowance can be claimed is the luxury car limit.

Can I claim on acquisition of second hand assets?

No, the investment allowance is generally only available for the cost of new assets or costs of improving existing assets.

If I use the asset only partially for business purposes can I claim the investment allowance on the whole cost?

Yes, provided you install it ready for use in Australia for the principal purpose of carrying on a business (principal purpose would generally mean more than 50%).

At time of printing only Draft legislation was available. We will advise of any changes or clarifications, when the legislation is adopted in its final form, next newsletter.

Tax bonuses

The Government will be providing five one-off payments in March and April 2009 for low and middle income households and individuals as part of its $42 billion 'Nation Building and Jobs Plan'.

The payments will not be taxable and will not be counted as income for social security purposes.

1. Tax Bonus for Working Australians

This bonus payment will be available to Australian resident taxpayers who paid tax in the 2007/08 financial year (after taking into account available tax offsets and credits).

The payment is subject to an income threshold test which determines that a:

n $900 bonus will be paid to eligible taxpayers with a 2008 taxable income of up to $80,000;

n $600 bonus will paid to eligible taxpayers with taxable incomes exceeding $80,000 and up to $90,000; and

n $250 bonus will be paid to eligible taxpayers with incomes exceeding $90,000 up to and including $100,000.

Taxpayers will not need to apply for the payment: the ATO will automatically make the payment after determining eligibility. However, the tax bonus will only be paid to those who have their 2007/08 return in by 30 June 2009.

2. Single Income Family Bonus

This one-off bonus payment of $900 is for families with children that have one main income earner (i.e., families who, on 3 February 2009, were eligible to receive Family Tax Benefit (FTB) Part B).

The payments will be made automatically by Centrelink from 11 March 2009.

3. Farmer's Hardship Bonus

The Government will provide a one-off payment of $950 to farmers and rural-dependent small business owners who, on 3 February 2009, are receiving certain income support and exceptional circumstances relief payments.

The payments will be made in the fortnight commencing 24 March 2009.

4. Back to School Bonus

This payment of $950 is for families eligible for FTB Part A on 3 February 2009 for each eligible child of school age (aged 4 to 18 on 3 February 2009).

5. Training and Learning Bonus

This $950 payment consists of two categories, the first being for eligible students, and the second being an additional incentive for social security recipients to return to education and training.

This information is provided as a guide only and is not intended to constitute advice whether legal or professional. You should obtain appropriate advice concerning your particular circumstances.

Liability limited by a scheme approved under Professional Standards Legislation
Just like you, we are always looking to grow. If you happen to know anyone who might benefit from our services, please know that we have the capacity to take on a small number of new clients, and we would be happy to meet with them for a free initial consultation.